The goal of government regulation of online education is consumer protection.

The U.S. Department of Education, accrediting organizations and state governments all set requirements for postsecondary education. In 2011, the department promulgated a new set of regulations designed to curb perceived abuses by online for-profit colleges. Federal courts have since blocked implementation of many of these rules, leaving in place a patchwork of existing requirements. The states seem to be reemerging as potentially the most effective actors to ensure that quality online alternatives also remain affordable and accessible.

Federal Regulation

The department of education does not set substantive educational requirements. Its role in regulating higher education springs from its management of student aid programs. However, schools must be accredited by an approved agency. The department maintains a list of approved accrediting organizations, thus effectively endorsing their quality standards. To reduce schools’ incentive to encourage unwise federal borrowing, Title IV of the Higher Education Act also requires that eligible schools receive no more than 90 percent of their revenue from Title IV sources.

New Federal Requirements

The history of the 2011 regulations has been highly contentious. Federal courts blocked implementation of a state authorization requirement, which would have expanded the regulatory role of states, and the gainful employment rules intended to reduce the maximum amount students could borrow for vocational training. Remaining rules prohibit incentive compensation for recruiters and require more complete disclosure of on-time completion rates, median loan debt, program cost and other information in the school’s promotional material.

State Regulation

States set substantive standards for elementary, secondary and postsecondary education, traditionally protecting citizens from poor quality and fraud. At the postsecondary level, states authorize schools to offer courses, verify their legitimacy and provide a venue for complaints. Each state has its own authorization requirements and fees. Designed for a brick-and-mortar era, however, these rules often focus on the concept of physical presence, which is difficult to use in the borderless world of online education.

Recent State Developments

Stepping into the spotlight, states have launched a variety of initiatives to educate citizens about online education or protect them from deceptive practices in the industry. In addition, to address online institutions’ concerns about the cost of seeking authorization in each state where students live, the Commission on the Regulation of Postsecondary Education has proposed a system of interstate reciprocity, easing administrative burdens for both states and schools.